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SERIES 66: Series66 (Series66) NASD Series 66
Free Practice Exam Questions (page: 8)
Updated On: 10-Jan-2026

Page 8 of 52
PDF with 251 Questions

Which of the following would represent the highest degree of interest-rate risk?

  1. A 30-year 7% ''AA'' corporate bond
  2. A five-year CD
  3. A savings account
  4. a 30-year 5% 'AAA' bond
  5. A zero-coupon bond

Answer(s): D

Explanation:

Interest-rate risk will affect both stocks and bonds. Investors who buy bonds run the risk of the bond's market value declining when interest rates rise. Longer maturing bonds tend to be more vulnerable to interest-rate risk; the same is true for bonds paying lower interest rates. Thus, the 30-year 5% 'AAA' bond would be riskier than the 7% 'AA' corporate bond.
Whether the bond is rated 'AAA' or 'AA' does not matter in this example. The rating of a bond can help determine business risk, but does not factor in to the interest- rate question.



Which of the following is NOT an example of a passive investment strategy?

  1. Indexing
  2. Buy and Hold
  3. Tactical asset allocation
  4. Systematic re-balancing

Answer(s): C

Explanation:

All of the choices except tactical asset allocation describe passive investment strategies. Tactical asset allocation strategy believes that markets are inefficient and that asset allocation can be actively managed, or balanced, based on market trends and economic events for the best return. This is also known as a market timing approach



The common stock of BigRich Industries has just suffered a huge loss as a result of poor management and a massive strike; they may need to file Chapter 11 soon. This is an example of which type of risk:

  1. Market risk
  2. Interest-rate risk
  3. Business risk
  4. Opportunity risk
  5. Inflation risk

Answer(s): C

Explanation:

The common stock of BigRich would be a valuable investment vehicle if the business were successful.
When business fails or declines, however, common stock value suffers. Because common stockholders are at the bottom of the priority list in the event of bankruptcy, BigRich stock could become worthless. This defines business risk.



Ronnie has just created her own publishing company and, as the sole owner, she wants to protect her personal assets in a simple business structure.
Which of the following would be an appropriate choice?

  1. Corporation
  2. Limited liability company
  3. Limited partnership
  4. Sole proprietorship

Answer(s): B

Explanation:

A limited liability company (LLC) will offer Ronnie protection for her personal assets if the company should fail. She is currently operating as a sole proprietor, with no liability protection. Ronnie does not qualify for either a limited partnership or general partnership since both require a minimum of two people. The LLC also has a more simplified business structure than a corporation and is, therefore, easier to administer.



Dollar cost averaging is NOT described by which of the following?

  1. A fixed amount is invested at regular intervals.
  2. Investors are protected against losses during steady declines.
  3. An investor buys more shares when prices are low and fewer shares when prices are high.
  4. Investors must consider their ability to continue funding the account whether prices are high or low

Answer(s): B

Explanation:

All choices are true about dollar cost averaging, with the exception that investors are NOT protected from losses that come from steadily declining markets. Additionally, investors may sustain a loss at redemption if the total cost of their shares exceeds the current market value



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